EBay Fails to Respond to Federal Suit

EBay is fighting a federal class action lawsuit in Detroit over its practice of forcing sellers in its marketplace to use PayPal, its in-house payments system.

While eBay has won past lawsuits over related complaints, fighting this one may be more of a challenge. That’s because eBay failed to respond to the suit.

Did eBay just forget to file paperwork? A company spokesman didn’t respond to calls and emails for comment.

After the company was held in default by the Detroit court for failing to respond, eBay’s attorneys last Friday requested a 14-day extension in the trial. In their request for an extension, they said “EBay and PayPal did not willfully default,” according to the Detroit News. Instead, they said, “the parties were engaged in dialogue and negotiations, and at no time had plaintiffs ever indicated their intention to seek entries of default.”

Peter Macuga, the plaintiffs’ lawyer who filed the case in Detroit, said he hadn’t heard much at all from eBay, and they weren’t in negotiations.

Eric Goldman, an associate professor at Santa Clara University School of Law, said the incident was odd. “It happens but it’s never a good thing,” he said. The court can now use its own discretion about giving eBay an extension.

The Detroit federal class action suit was filed on April 12, seeking unspecified damages and the right for sellers to accept forms of payment other than PayPal. EBay has said the move to make PayPal mandatory helps to improve the safety and reliability of selling on its marketplace. Yet critics have complained that forcing sellers to use PayPal is just another way for the company to charge additional fees and pad its bottom line.

Macuga, the plaintiffs’ lawyer, said eBay was violating anti-trust laws. “There’s no reason at all why US currency shouldn’t be useable,” he said. “There is no reason why cashiers’ checks or any other form of liquidity should be precluded — except that eBay makes more money utilizing PayPal.”

A federal court in California spent nearly three years weighing similar issues in a case that eventually was dismissed this March. Macuga said the California case is “different to the case we filed here in Michigan,” adding that it wouldn’t set a precedent for his case, which falls in a different jurisdiction.

UPDATE: EBay’s senior director of litigation Michelle Fang responded on Thursday. She said that eBay was never properly served with the lawsuit — so the company was never legally required to respond. Under Michigan law, she said, lawyers must serve copies of a suit to “our agent or send a copy to a director of the company — as well as send a copy to the company by certified mail.” The lawyer in this case only sent a copy by certified mail, she said.

Moreover, the court’s clerk, Fang said, granted a default automatically when the plaintiff filed for one. “Now we have set our motion to set it aside, and the court will look at it,” she said.

“We are confident that the default the judgment will be set aside,” Fang said. She characterized the Michigan lawsuit as being “virtually identical” to the one that eBay won in California.